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1 mark

The _________ may indicate that the firm is experiencing stockouts and lost sales.

  1. A
    Average payment period
  2. B
    Inventory turnover ratio
  3. C
    Average collection period
  4. D
    Quick ratio

Solution & Step-by-step Explanation

An exceptionally high Inventory Turnover Ratio relative to sector benchmarks indicates that inventory is moving very fast. While usually positive, an excessively high ratio can mean the business carries too little safety stock, leading to frequent stockouts, an inability to fulfill sudden customer demand, and lost sales opportunities.

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The _________ may indicate that the firm is experiencing stockouts and lost sales.
A
Average payment period
B
Inventory turnover ratio
C
Average collection period
D
Quick ratio

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